4
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I
NDIA
B
RIEFING
|
July 2014
Evaluating the Market:
Key Sectors
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Several key growth sectors and industries make India an increasingly
appealing destination for foreign companies seeking out new
markets for their products and services. While FDI caps and
restrictions can impede direct access to some key business sectors
in India, the incoming BJP-led government has hinted at possible
changes to the country’s FDI policy—most notably in multi-brand
retail, e-commerce, railways, defense, and construction.
India’s Retail Sector
For many foreign companies, the opportunity to capture a share of
India’s rapidly growing retail sector is themost compelling reason to
explore options for exporting to and investing in the country. With
more than a billion potential consumers, a growing middle class,
steadily rising household income, and an organized retail market
valued at more than US$30 billion, India’s retail market is among the
most underpenetrated and promising in Asia. According to some
analyses, increasing income levels combined with moderating
savings will cause India’s consumer market to quadruple over the
next two decades.
Between 2010 and 2012, India’s retail industry grew at around 10
percent per year, and is expected to maintain a compound annual
growth rate (CAGR) of close to 19 percent through 2015—ultimately
reaching a total value of US$800 billion in 2016-17. Organized retail,
which currently constitutes around 8 percent of the total retail
market, is expected to grow significantly faster than traditional retail
and account for 20 percent of the retail market by 2020.
Within India’s retail market, food and grocery currently comprises the
largest market segment at around 60 percent, followed by apparel,
(8 percent), andmobile and telecom (6 percent). In organized retail,
apparel dominates at 33 percent followed by food and grocery
(11 percent), mobile and telecom (11 percent), and consumer
electronics (8 percent).
While raising FDI caps in single and multi-brand retail to 100 and
51 percent respectively and loosening investment restrictions
have eased some barriers to market entry, reaching India’s
underpenetrated rural retail market remains the ultimate challenge
(and prize) for many companies.
Underdeveloped infrastructure, an overall high cost-to-serve, and
unreliable payment and delivery options continue to hinder access
to rural consumers. However, this may change soon. Rapidly rising
internet and smartphone penetration rates across India are driving
the demand for easier access to organized retail in rural areas and
better options for payment systems and delivery methods.
The
is the principal organization
through which retailers in India communicate their concerns to the
government, and the
and
can serve as additional resources for companies exploring their
potential in the sector.
60%
8%
6%
5%
4%
3%
3%
11%
Food and Grocery
Apparel
Mobile and Telecom
Food Services
Jewelry
Consumer Electronics
Pharmacy
Others
Total Retail Market
Food and Grocery
Apparel
Mobile and Telecom
Food Services
Jewelry
Consumer Electronics
Footwear
Others
Within Organized Retail
＊
33%
11%
11%
8%
7%
6%
4%
20%
＊
India’s organized retail sector accounts for 8% of India’s total retail market.
